Consumer Led Change

Payments and the way they are made in the region are changing rapidly with consumers spurring demand. Martijn Van Os Senior Vice President, Mastercard Payment Gateway Services explains how and why

Martijn Van Os, Senior Vice President, Mastercard Payment Gateway Services (MPGS)

Describe what makes payments such fertile ground for innovation in Middle East banking.

In a world coming to terms with the impact of the COVID-19 pandemic, farreaching business digitalization has been the bridge between the old and the new normal. As countries implemented measures to contain the pandemic, meetings went online, more transactions became contactless, experiences became virtual and shopping morphed into e-commerce, enabling the world to maintain a business trajectory while also setting the foundation for the future. It is difficult to imagine how a pre-digital world would have coped with the extreme level of mandated physical distancing, without the option to digitalize.

Payment innovation in the region had already been flourishing, with larger corporations and financial institutions pledging digital-first strategies.

The trend towards increased digital adoption has continued despite lockdowns being lifted. According to the Mastercard New Payments Index, 95% of consumers in the Middle East and North Africa (MENA) are considering emerging payments such as wearables, biometrics, digital wallets and currencies, and QR code, in addition to Contactless. It revealed that 88% of MENA consumers have access to more ways to pay compared to 2020, while 3 out of 4 MENA consumers said digital payments methods helped them save money.

At the government level, many countries are driving forward their digitization agendas. In the UAE there is the National Digital Government Strategy, and the National Strategy for Digital Transformation in Saudi Arabia. This is helping to create an attractive and sustainable environment towards digitization and, as a result, we are witnessing a proliferation of fintech entrepreneurs calling MENA home.

How much further can retail payments go in terms of innovation and what might we expect to see next?

As a multi-rail company that serves merchants, banks, telcos, fintechs and governments, we at Mastercard are redefining the future of payments.

Our vision for the future of payments is one that doesn’t only improve current payment systems, but also takes them to a whole new level.

Mastercard Installments, launched in the UAE and Saudi Arabia in January 2022, is a perfect example. It uses the power of our trusted network to make Buy Now, Pay Later (BNPL) available to millions of consumers and merchants worldwide. It enables banks, lenders, fintechs and wallets to offer a variety of flexible instalment options to consumers, including a zero percent interest, pay-infour model.

There is a greater expectation for businesses to provide multiple ways to shop and pay during the pandemic. In fact, 61% of MENA consumers say they would avoid businesses that do not accept electronic payments of any kind, according to the Mastercard New Payments Index.

What are the main challenges banks face in providing or advancing payment services and solutions?

The challenges are similar all over the world – cybercrime is becoming much more sophisticated. As an industry, we have to work in partnership with financial institutions and fintechs to develop new ways of monitoring the type of activity conducted by merchants.

In December 2021, Mastercard joined the Dubai Financial Services Authority (DFSA) Threat Intelligence Platform (TIP). The collaboration cemented Mastercard’s commitment to construct intelligence-led,

public-private partnerships and boost cyber resilience across the Middle East, Africa and South Asia region.

Mastercard, through acquisitions such as Brighterion, is innovating AI-based capabilities to support PSPs and gateways. Brighterion has revolutionized AI, enabling Mastercard to stop payment and acquirer fraud, waste, abuse and more.

Merchant education in developing markets is also incredibly important right now. Advising merchants on best practices, such as developing frictionless checkout journeys, will make a sizeable difference.

On the SME front which constitutes large number of merchants, servicing them with the right tools that apply to their specific industry is another challenge. Mastercard’s Simplify Commerce has been developed to cater to these important SME market dynamics and needs. Acquiring banks can easily integrate this all-in-one small business ecommerce platform and allow their merchants to sell online and accept payments quickly and securely.

How far along are regional bank payments solutions when compared with other parts of the world?

Digital bank transformation has been on the top of the agenda of most global organizations. But, like retail, the pandemic accelerated the need for banks to innovate their digital payments as they faced increased competition from the usual players, as well as fintechs and nontraditional banking entrants.

Banks in the MEA region are in varying stages of their digital journeys, which

can be impacted by resources available, country specific regulations, and the bank’s appetite for change. However, the interest in digital transformation spans traditional banks and fintechs – all striving to leverage the shift to disrupt traditional models. Many of the banks that have already embarked on digital transformations have been able to respond to the consumer demand for innovation in payments.

Banks in the region that have migrated customers and transactions to digital channels have seen digital transactions increase from 70% of all transactions to 90%.

Our White Label payment gateway has been designed to help acquiring banks enhance their merchant payment products and offer consolidated payment platform with the latest digital technology without the need of in-house development.

Open Banking is also gaining momentum in the Middle East, particularly in Bahrain, whose regulator started its open banking journey in 2018 and followed this up with the Bahrain Open Banking framework in 2020 which gives consumers more choice when it comes to managing their money.

IN FACT, 61% OF MENA CONSUMERS SAY THEY WOULD AVOID BUSINESSES THAT DO NOT ACCEPT ELECTRONIC PAYMENTS OF ANY KIND

How important a builder of customer loyalty are fast and easy payments solutions?

A Mastercard consumer spending study conducted in late 2020 revealed an accelerated growth in online shopping, with 73% of consumers across MEA reporting a move online since the start of the pandemic. More than half also credited the fast, convenient and secure transaction features of e-payments as additional drivers to shopping online.

Today’s consumer is connected. We need to meet consumers where they are, when and how they want to engage. This means connecting them across channels in a meaningful way and bringing them high-value services. These are the building blocks for robust, loyalty programs today and into the future.

Businesses that can offer a quick and reliable way to pay will see their customers returning time and time again. Click to Pay is the next generation of eCommerce technology, to make it easy and safe for consumers to instantly check out without the need to enter their card credentials and passwords across various Click to Pay-enabled sites.

The same rule applies to in-store payments where contactless not only speeds up the payment process, but also makes it more likely for consumers to visit again. As Mastercard has recently announced, one in two in-person Mastercard transactions worldwide are now contactless.